‘Financial markets are not rigged’: CME Group president

The president of the world’s biggest futures exchange kicked off his Senate testimony Tuesday with a blunt pronouncement: “the financial markets are not rigged.”

“Let me say I strongly agree with regulators – in both the futures and the equities markets – that the financial markets are not rigged,” Terrence Duffy, executive chairman and president of the CME Group
/quotes/zigman/107063/delayed/quotes/nls/cmeCME, told the Senate Agriculture Committee on Tuesday. Read testimony.

The committee held a hearing on high-frequency and automated trading in futures markets, as well as other forms of automated trading in the derivatives markets. Senators of both parties said regulators need authority and the tools to keep up with changing markets.

The hearing comes with high-speed trading in the spotlight. Journalist Michael Lewis claims in his recent book “Flash Boys” that high-speed traders use electronic tools to quickly gain an unfair advantage over other investors.

Duffy said in his testimony that “the futures markets today are more open and accessible than ever before.”

Regulators are mulling new rules on high-speed traders. The Commodity Futures Trading Commission’s former chief economist told senators that high-speed traders should register with regulators. Andrei Kirilenko, now a professor at the Massachusetts Institute of Technology, said there should be a registration category for automated brokers and traders. The definition would be similar to what used to be called “floor brokers and traders,” Kirilenko said.

Vince McGonagle, the director of the CFTC’s division of market oversight, said the agency is considering whether to use the floor-trader definition for high-frequency traders. He said the question is whether the agency already has the information it needs and whether additional registration requirements “fit within our regulatory structure.”